The revelation came in a secret meeting with Mrs May’s chief of staff Gavin Barwell

Publicly yesterday, Mr Hammond was still standing by the cap, as he again insisted that there was “no change in the government’s position”.

But in a hint over the U-turn ahead, the Chancellor also told the Commons: “Our pay policy has always been designed to strike the right balance of being fair to our public servants and fair to those who pay for them.

“That approach has not changed, and we continually assess that balance.”

Mr Shapps told The Sun last night: “We’re all fed-up with austerity, but we must learn the right lessons from this election.

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Conservative Member of Parliament for South West Bedfordshire Andrew Selous was one of the Tory MPs present

“We lost because we offered people a long list of punishments, rather than hope and failed to fight for better livelihoods for everyone from the hospital nurse to the aspirational small business owner.”

Downing Street has argued that the pay cap has protected hundreds of thousands of state jobs.

Other Tory backbenchers also spoke out on the tinderbox issue yesterday.

One, Johnny Mercer, vowed: “I will persistently be a loud voice to remove the public sector pay cap for frontline workers”.

Another, Tom Tugendhat, added: “This is a matter for the budget not the Queen’s Speech. I’ve spoken to the Chancellor about it”.